Specialty hospital advances despite stalled Medicare OKs

A national moratorium put its construction on hold, but a California facility is among a few banking on CMS approval by the time it's built.

By Katherine Vogt, AMNews staff. Oct. 3, 2005.

Construction could begin by the end of this month on a new surgical hospital in Southern California, marking one example of how physicians are moving forward with plans to build specialty hospitals despite lingering uncertainty about how regulators view such facilities.

The California Heart and Surgical Hospital in Loma Linda passed a major hurdle on Sept. 6 when the city council there approved its plans to build a $60 million, 28-bed multispecialty surgical hospital despite vocal criticism from community hospitals in the area.

AMA president-elect William G. Plested III, MD, spoke at an earlier city council meeting in favor of the facility; the AMA's House of Delegates put into policy support for physician-owned specialty hospitals.

The approval cleared the way for construction to begin this fall.

But another major regulatory test could be yet to come when the hospital, led by 36 physician investors, eventually applies for licensing from federal regulators. Though a congressionally imposed 18-month moratorium on physician referrals to new specialty hospitals expired in June, the Centers for Medicare & Medicaid Services has left uncertain its position about such facilities.

CMS has said it will take until January 2006 to assess whether the hospitals meet Medicare requirements. In the meantime, the agency will not approve applications from any new specialty hospitals for participation in the program.

For Allen Gustafson, MD, an orthopedic surgeon spearheading the California Heart and Surgical Hospital, the regulatory ambiguity hasn't been worrisome enough to prevent him from trying to advance a project that has been on his mind for several years.